(WITHDRAWN) Reducing Intergenerational Poverty in China: Social Assistance or Universal Child Grants?

Background and Purpose:Despite evidence from many developing countries on the influence of cash transfer programs on child outcomes, little research has been done in China on this topic, especially on the idea of universal child grants. In this article, we examine the effects of China’s primary social assistance program, the Minimum Livelihood Guarantee (or Dibao), on child poverty and education spending on children in rural China. We further simulate the effects of two proposed child grants programs on child poverty and compare these results with those based on the existing social assistance program, Dibao.

Methods:This study uses the China Household Income Project 2013 rural dataset. We measure education consumption by seven sub-categories, including expenditure on early, elementary, middle school, high school, secondary vocational school, junior college and higher, and continuing/adult education. Child poverty is measured in two ways: percentage of households with children whose income per capita is below national rural poverty line and percentage of children whose household income per capita is below national rural poverty line.

In analysis, we first adopt a propensity score matching method to match children from recipient and non-recipient families to estimate the “net” effects of receiving Dibao on child education consumption. Second, to estimate the potential effects of child grants programs and compare them with those from Dibao, we conduct simulation analysis to estimate the potential effects of two versions of child grants on child monetary poverty: 1) a limited version that only provides grants to children living under the local Dibao line (Limited Child Grants, or LCG); 2) a truly universal version that provides grants to every child under 18 years old (Universal Child Grants, or UCG).

Results:Results show that rural Dibao receipt was associated with modest increases in total education spending but significant decreases in spending on enrichment and leisure activities. Specifically, rural Dibao receipt was associated with significant increases in spending on compulsory education for some Dibao families, and the increases were mostly driven by increased expenditure on middle school education. Our simulation results show that UCG was more cost effective in reducing child poverty than both LCG and Dibao, the two policies that showed similar small effects on child poverty reduction.

Conclusion and Implications:Though Dibao is not set targeting specifically to support children in poverty, it is an inspiring finding that rural Dibao was associated with a modest increase in total education consumption per child. This indicates that cash transfer can promote development of poor children and may play a role in preventing inter-generational poverty transmission. One of the reasons for the finding that UCG was more cost effective in reducing child poverty compared to LCG and Dibao is the severe mis-targeting and leakage problems that exist in rural Dibao, which leads to the exclusion of poor children from receiving the cash transfers. In order to alleviate child poverty effectively, the Chinese government should focus on reducing mis-targeting and leakage in current social assistance programs, or better yet, implementing UCG, which is more cost effective.